Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.
First-Time Buyer Affordability at Highest Level Since Financial Crisis
The affordability squeeze for first-time buyers reached its most severe point since the global financial crisis in June, according to new data from UK Finance. Mortgage payments for a typical first-time buyer amounted to 22.6% of gross income, the highest proportion recorded since the financial crisis began.
Despite the sharp rise in mortgage rates, UK Finance reports that gross lending is broadly on track to meet previous forecasts for the year. The industry body has maintained its prediction that gross lending will rise by 4% to £300bn this year. In the first six months of 2026, gross lending totalled £145bn.
Remortgage activity has remained resilient, helping to offset pressure on house purchase affordability. House purchase lending is expected to increase by 2% to £180bn in 2026, with £82bn recorded in the first half of the year. However, UK Finance notes that this rise largely reflects modest house price growth rather than a significant increase in transaction volumes. Purchase activity in the first seven months of the year was slightly lower than in 2025, when transactions were boosted by buyers completing ahead of stamp duty changes.
Affordability pressures have increased sharply following a rise of around 100 basis points in fixed mortgage pricing from March. By June, mortgage payments for the typical first-time buyer accounted for 22.6% of gross income. UK Finance reports that rates eased after peaking in early April but began rising again from July, with the average five-year fixed rate close to its April peak at the time of the report.
Buy-to-let purchase lending is forecast to remain flat at £11bn this year, with £5bn advanced in the first six months of 2026. UK Finance states that the Renters’ Rights Act and recent tax changes have weighed on landlords’ appetite to buy. Across both residential and buy-to-let, remortgaging is expected to be the main source of growth in 2026. External remortgage lending is forecast to increase by 10% to £77bn, with £41bn completed in the first half. Internal product transfers are expected to rise by 2% to £261bn, following £143bn of lending up to the end of June.
Mortgage arrears have continued to improve, with UK Finance forecasting a 5% fall to 87,493 mortgages in arrears by the end of 2026. By June, the number had already dropped to 86,340, approaching historic lows recorded in 2022. There were 3,840 possessions during the first half of the year, and UK Finance predicts this will reach 9,415 for the full year, a 10% annual increase on 2025.
Source: Mortgage Strategy